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Johannesburg - South African benchmark government bonds were
firmer in early on Thursday trade and held on to recent gains after the 2015
bond hit an all time high in the previous session, while foreign investors
showed preference for local debt over US Treasuries.
The rand opened weaker against the dollar but was still
within the week's range as a risk rally from the previous session abated and
investors covered against risk.
The stock market looked to open lower.
Investors will be looking for indications of the
government's fiscal policy when Finance Minister Pravin Gordhan speaks at a
presentation of state-owned Land Bank's results at 09:30 GMT.
The yield on the benchmark 2015 bond was down two basis
points to 6.77% while that on the longer-dated 2026 bond dropped 2.5 basis
points to 8.085%.
The four-year bond yield is trading at record lows as
offshore players pile into South African debt, which is yielding higher returns
than developed markets whose interest rates are near zero in several economic
powerhouses.
Market players see it as unlikely for the South African
Reserve Bank to hike interest rates this year, which should push yields even
lower. Many are revising forecasts and see the first rate hike in May 2012.
The bond market is however over-bought and will likely to
see profit taking on the day.
"The R157s traded as low as R6.72 but were pushed back
at the close due to some small profit-taking. Bonds have rallied lately and we
expect to see some lightening of positions," Rand Merchant Bank said in a
morning note.
The rand failed to break below R7.05 in the previous session
and has traded in a R7.05 to R7.22 range set at the start of the week. By 06:42
GMT, it was at the session low of R7.1350, 0.6% down from Wednesday's close in
New York.
Dealers say the currency has been stuck in the range this
week after a volatile week previously and seeing that safe-haven assets are
gaining again in early trade, while risky assets are weakening. They expect
that the R7.05/R7.06 level will prove to be tough resistance for rand, which
could be pushed by global recession worries
The JSE Top 40 - (Tradeable) [JSE:J200] September futures
contract ALSIc1 was down 1% before the start of trade on the bourse at 07:00
GMT.
